Nvidia's stock selloff inspired retail investors to buy the dip

By Gordon Gottsegen

The megacap tech stock entered correction territory this week - and individual investors took advantage of the discount

Nvidia Corp. shares may have entered correction territory on Monday after a three-day slide, but that still wasn't enough to scare off retail investors.

Nvidia (NVDA) closed at an all-time high of $135.58 on June 18. Then, it quickly dropped almost 13% over the next three trading days. Yet with the stock still up almost 140% this year to date after the correction, many retail investors took the selloff as an opportunity to buy Nvidia at a discount - a move rewarded by the stock's 6.8% rebound on Tuesday.

See also: Nvidia beats Apple and Tesla to become the largest holding in average retail portfolio

Investor interest in Nvidia has been strongly biased toward the buy side over the past five days, according to Steve Sosnick, chief strategist at Interactive Brokers. He noted that the GraniteShares 2x long NVDA Daily ETF NVDL was the 11th-most actively traded ticker on the Interactive Brokers platform and also showing net buying.

"It is not surprising to see a stock which has performed so dramatically well (+11% this month, +35% this quarter) attract an immense amount of interest - both on the way up and down," Sosnick told MarketWatch in an email. "It's also not surprising to see 'buy-the-dip' activity this morning. Quite frankly, I'm a bit surprised that we hadn't seen it in earnest sooner."

Sosnick also pointed out that options activity surrounding Nvidia showed a long delta bias, meaning investors were buying calls and selling puts more often than taking the opposite strategy.

The investor interest in Nvidia in the wake of the selloff falls in line with other data that show retail traders are more likely to buy the dip than try to time upswings with momentum trades.

Nvidia has seen strong retail buying throughout 2024, but there was a noticeable uptick in daily retail inflow following its first-quarter earnings report in late May, according to data from Vanda Research seen by Finbold.

This buying comes at a time when a number of Nvidia insiders are selling their positions, including the company's chief executive, Jensen Huang. However, the amount of shares Huang sold are just a fraction of what he owns, likely indicating that the CEO remains confident in the future of the company. If that's the case, he shares that sentiment with the retail investors that flocked to buy Nvidia's dip.

-Gordon Gottsegen

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06-25-24 1622ET

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